CNA - Analysts say new housing measures will help cool red-hot resale market

30 August 2010 2054 hrs

SINGAPORE : Market watchers said the new rules requiring private property owners to sell their homes within six months of buying an HDB flat will go some way in cooling the red-hot resale market.

New rules on second home loans may also moderate demand somewhat.

Some analysts expect the rules restricting dual home ownership to have an "almost immediate" impact on resale demand.

Chris Koh, director of Dennis Wee Group said: "Those who've dreamed of owning a HDB flat and a private at the same time now have to think harder. I would expect this will probably dampen prices a little.

"HDB owners who are hoping to find private property owners to buy their HDB flats and are willing to pay premiums, will no longer have that option. So those who buy flats today really buy it for owner occupation, which primarily is the function of public housing."

The new rules kick in on August 30, and some analysts estimate that about 10 per cent of such transactions will be affected.

HDB said those who have only recently submitted their applications to buy an HDB flat may be granted exemptions on a case-by-case basis.

But there will be no such leeway for buyers looking to finance their second home, be it private or HDB, with a bank.

Under new rules, they will have to cough up a larger cash payment - from 5 per cent previously, to 10 per cent.

And those with an outstanding loan can only get a bank loan of up to 70 per cent of the property's value, instead of the previous 80 per cent.

The idea is to prevent people from being overstretched by servicing two loans.

But those looking to buy a second home using a bank loan, may find themselves in a sticky situation. This is because a sales transaction takes a few months to complete and if you're in the midst of selling your home which has an outstanding loan, the higher cash requirements apply.

So one way around it is to complete the sale of your first property before buying your second, but this means you'll need to find a place to live in the meantime.

Koh suggested that an alternative is to take up a bridging loan from the bank to finance any cash or loan shortfall, should one buy first before selling.

Other industry watchers welcomed the wider options for the "sandwiched class" - so-called because their incomes are too high for most new HDB projects, but are too low for private condominiums.

They can now buy flats under the Design, Build and Sell Scheme (DBSS) and analysts expect some demand to move away from the resale market.

Some observers said the move will pile on more demand for DBSS projects, which tend to see strong take-up rates.

"From previous launches you can see that practically all DBSS projects are sold out, except for units leftover primarily because of the Ethnic Integration Ratios that have been exceeded. So by and large, most of the DBSS projects are all well taken up, and this was before including this 'sandwiched class'," said Eugene Lim, associate director of ERA Asia Pacific

According to HDB, two DBSS projects launched this year - The Peak in Toa Payoh and Parc Lumiere at Simei, with over 1,500 units in total - 90 per cent were sold out as of end-May.

HDB is looking to shorten waiting times for new flats from three years to two and a half years.

But some buyers said they may still stick to buying resale.

"Two and a half years is not my concern. The problem is I'm not guaranteed. For instance, I'm waiting for the balloting, and it ends up that I may not get what I want after the balloting result is released," said home-buyer Ang See Ngee.

Overall, analysts said the new rules will help to ensure that resale demand is based on real demand. - CNA /ls